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Tax Law (Questions About Taxes)/Retirement Withholding for Minister

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QUESTION: In preparation of W2's, etc. coming up, I'm not sure what to do for the following:  We are a non profit church and for one of our ministers we withheld retirement from his salary.  We have never finalized the fund into which the contributions will go, so thus far we have only withheld and not paid into anything.  On our other ministers (we pay into their plans monthly) I include this amount on their W2's in box 12. What do I do for this one?
Thank you

ANSWER: Chris,

Thanks for your question.

Treat it just like all the others.  However, you should proceed with all due haste to invest those funds into a qualified retirement plan, even if it is just into a money market account.  Not having the funds invested by the end of the year could have some adverse consequences down the road.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: Yes, this helps.  I do have another question, you mention adverse consequences down the road - what would those be?
Chris

Answer
You have withheld the funds and reported them as such on his W-2.  If the funds are not invested during the tax year, it could cause problems if the IRS made an inquiry.  It could also affect the amount he could contribute for the new year, in the event he was maxing out or close to maxing out his contribution for that year.

John Stancil, CPA

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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